Chicago counsel Nicholas Wendland leveraged his extensive experience at FINRA and the New York Stock Exchange and his in-depth understanding of complex financial products and global regulations in his analysis of the status of virtual currency in the eyes of the regulators in two articles in The National Law Review.
In “SEC Says Bitcoin and Ether Are Not Securities” (June 18, 2018), Nicholas draws from a speech by William Hinman, the Director of the Division of Corporation Finance, in which Hinman specifically emphasized that “the analysis of whether something is a security is not static and does not strictly inhere to the instrument.” It is uncertain how the SEC would seek to regulate a security that, “over time, transforms into a currency or from a currency into a security,” says Nicholas, “but this concession from the Commission is important for the crypto space as it provides some needed guidance to the marketplace.
The second article, “NFA Proposes Enhanced Disclosure Requirements for Members Engaging in Virtual Currency Activities” (July 27, 2018), comments on an interpretive notice of the National Futures Association. According to the NFA’s interpretive notice, says Nicholas, “virtual currencies and virtual currency derivatives have a variety of unique and potentially significant risks. These risks include price volatility, valuation and liquidity sourcing issues as a result of the decentralized and opaque spot market, unregulated intermediaries and custodians, an uncertain regulatory landscape, and security of assets due to nascent technology. The proposed disclosures are intended to educate and warn customers of these unique risks. As outlined, a member would have different disclosure requirements based on its registration status and virtual currency activities.”